Countering Council Cuts: Local Alternatives to Austerity

This post was first published 3 weeks ago, but we’ve decided to re-post as a response to this controversial piece on Liberal Conspiracy.

Photo courtesy of Guardian Edinburgh via flickrWhile we’ve rightly been focussed so far national campaigns, defending welfare and education, we mustn’t overlook the fact that many of the cuts we are likely to face over the next few years will not be imposed directly from Westminster but by our own local councils.

Opposition to cuts at council level will be hard to coordinate nationally as those cuts will obviously be different in different places. There will, however, likely be common themes to which we can form common responses. Councils will undoubtedly claim they have no choice, they have to set balanced budgets, so if their funding is cut they have no choice but to pass that on.

To an extent that’s true but it isn’t the whole truth, either. They do have options, council tax, whilst regressive and in need of replacement, could be raised. Through a process called Tax Increment Financing (TIF) councils can borrow money to finance investment in infrastructure and capital projects. If projects are expected to stimulate the local economy, and hence increase the future tax take, that money can be borrowed against now, with the future income paying off the loan. Or councils could form their own energy service companies to raise revenue, increase renewables and reduce energy bills. New revenue streams and ways to leverage new money can be found if councillors are willing to think creatively.

Councils need to persuaded, too, of the necessity of longer term costs and benefits over the, apparent, short term requirements. They need to consider the wider impact of their spending decisions. Cuts in one place may lead to higher spending elsewhere, and not just in the future but right now. If youth centres are cut, for example, crime might increase, leading to higher overall costs. Costs not borne by the council perhaps, but still borne by tax payers.

Where cuts do have to be made, front-line services must be protected and spending on things like corporate branding could be cut. Edinburgh council, for example, spends hundreds of thousands of pounds every year on it’s ‘inspiring capital’ branding, to little obvious effect.

And if acceptable savings can’t be found, and tax increases or other revenue sources cannot cover the shortfall, real cost budgets could be produced, where the council refuses to implement cuts or set a balanced budget and instead sets one according to the needs of their area. Councillors who genuinely oppose cuts should not be forced to implement them and accept the responsibility and blame.

It’s often responded that if councils don’t set balanced budgets, central government will step in and the cuts will be far worse, but if councils do refuse to help implement cuts and force that take over that sends a very powerful message. If that stance can be coordinated with workers in the affected councils taking strike action or with occupations or good work strikes, it could be very difficult for the coalition to implement their policies. I accept that would require a great deal of cooperation and to happen on a large enough scale, but we need to think creatively and optimistically about our ability to resist. Simply trying to make awful cuts merely very bad risks reducing our power to oppose the broader issues and leaves us reliant on someone else forming that extra-parliamentary movement that must be essential if we want to have any real success.

As I say if we can make significant saving through efficiency then we should do that. I don’t know about England and Wales and Northern Ireland but I do know that here in Scotland councils have already been forced to find efficiency savings every year over the last few years and I don’t know how much more can realistically be found. I’m happy to cut pay a the top too, but how much does that really raise? If there’s not going to be a major difference between cuts we (as Greens and the broader left) impose and those central government would, then what’s the risk?

Consultations

Of course, just as Westminster has passed much of it’s cutting onto councils, councils themselves may try to pass the buck for cuts further to local people. In Edinburgh we had a consultation from the council last year asking us to choose which cuts to make. And it was which cuts to make, there were very limited options, with very clearly leading questions, false dichotomies. Tax rises and outright opposition were not encouraged.

We need to ensure that there is real debate at a local level, that ordinary citizens are given a meaningful say in what happens to their communities. We need to take the opportunity to try out new forms of organisation. Methods like participatory budgeting, recently trialled where I live, in Leith, give people a direct say in how their money is spent. The first project was hugely successful, with a great turnout, lots of applications for funding and most people generally happy with the results. The trial only covered a small amount of money, and for community projects not core services but it shows genuine engagement and direct democracy is possible in our society.

We need to make these sort of schemes much more widespread. People will be looking for alternatives to austerity and cuts and the untrustworthy politicians enforcing them. We need to take the chance to show there are other ways to organise our economy and our society. Not just politics but economics can be democratised. As Adam pointed out at the start of the year, democratic reform needs to go far beyond electoral reform. Participatory economics won’t magically give councils more money to spend, but it would allow local people a real say over how what money there is spent. And if people have real control over how their money is spent and can see where it goes and how much it costs to provide the services they use that could be truly transformative.

3 Comments Already

I’m with you on consultation and efficiency savings, but I don’t think there’s much mileage in most of your local alternatives. Some of this may be different in Scotland, of course, I’m only going on my knowledge and experience of England/London.

Council tax – the Government’s imposed cap plus the bribe make this completely pointless and impossible as a means of raising further revenue.

Tax increment financing – this hasn’t yet been fully opened up to councils, so far as I know. It’s still being developed by the Treasury, will probably be constrained by prudential borrowing rules, and for significant sums might even involve Treasury sign-off.

Energy service companies – yes, fab, one for future years as they won’t start bringing in a substantial revenue let alone profits in 2011/12. They’re a good place to invest excessive reserves to offset future cuts.

Higher overall costs – as you note, not borne by the council so whilst an important point in the national debate such costs have no relevance to a council budget.

Other revenue sources – across London councils are putting up parking charges, rents for allotments, etc.

I’ve not yet seen a convincing balanced budget package for a local authority that achieves the “no cuts” aim. That tells me that actually we need to focus the argument about cuts on the Government, and attack our councils for particular choices (this rather than that) and the lack of proper community participation.

As for the “very powerful message”, I think it would be more accurately described as a “very powerful ego massage”. As with balanced budget proposals, I’ve not yet seen anyone put a decent argument forward for the political impact of illegal budgets. It seems much more likely to result in worse cuts, a field day for Eric Pickles and a black mark against the local authority in the eyes of the (current) majority who aren’t so decidedly anti-all-cuts. I don’t think many people remember 1980s Lambeth fondly.

You both make fair comments. Some of the suggestions in my article are more suited to the medium, or even long term prospects of council and won’t be able to have a serious impact in the immediate future. On the other hand, whilst TIF is not available yet, prudential borrowing is possible. Paul suggested in his article on Liberal Conspiracy that it’s perhaps not prudent to borrow to fund revenue spending and on the face of it that’s a perfectly sensible point. However, as I attempted to point out, cuts now can lead to higher spending in future, some of which will be borne by central government not local authorities but some of which will impact directly on councils. Borrowing now to prevent those costs might be prudent. We have to remember, as well, that it is not only revenue budgets that are being cut, but capital as well, and borrowing to fund that expenditure might be sensible.

You’re correct to say, though, that even with all of that there will undoubtedly be council facing substantial shortfalls this year which cannot be covered by efficiency savings. At that stage there are several options. One, you acquiesce with cuts and try to make them not as bad as they would be if someone else implemented them. Two, you raise taxes or service charges quite substantially to cover the costs. Or, three, you refuse to accept that cuts are possible without unacceptable harm and set a no-cuts budget.

That’s not an easy, or pleasant, choice. Any of those are likely to cause hardship and carry risks. I think there is a real danger, however, being co-opted to help implement cuts. It’s not an ego trip to think that cuts will cause inevitable and significant damage even if you are the one choosing where they fall and that that is not acceptable. That’s the stage at which I think it is really essential that there is genuine democratic involvement with those who will bear the brunt of whichever choice councillors make. Councillors need to be completely honest about the effect cuts will have, the effect taxes or charges would have and the risks associated with a no cuts budget. But to unilaterally say that the only acceptable choice is cuts is undemocratic and shows a lack of imagination or optimism that we can really change anything.

I’d finish by just saying that you should read Alex Wood’s piece we published today on no-cuts budgets, it’s far better than mine and makes the case much more persuasively than I can.